Should You Squat in Your Foreclosed Home? Here’s How to Do it Legally

Published by julia | Filed under Buyer / Seller Tips, Real Estate, Shout Outs

Let’s face it … the current mortgage crisis in this country is due to the irresponsible lending practices of mortgage companies over the past several years. Many sub-prime lenders crawled out of the woodwork and gave mortgages to people who obviously couldn’t afford them, often not even asking for proof of income before approving the loan. Other companies started new customers with questionable credit out on adjustable rate mortages with low initial interest and payments, only to see those borrowers default once the interest rates raised and the borrower could not qualify for a refinance. The mortgage companies set homeowners up to fail, and now they’re actually begging the federal government to bail them out from the losses they’re taking from all the bad loans they made.

However, while the banks may be getting help, the average homeowner facing foreclosure certainly isn’t. They’re victims of this insidious system, and are thus far being essentially ignored. Homewoners in foreclosure are left with little choice but to deal with the problem themselves in as creative a way as they can. Fortunately, there are companies and individual real estate investors out there who are willing to help. Finding the right one can be a God-send, as then the homeowner won’t have to feel as if he’s scrambling for footing in a cold and unfeeling maze of financial regulations.

One of the suggestions increasingly being made to homeowners who are about to lose–or have already lost–their homes is to squat in it. Even a U.S. Congresswoman suggested this! When you squat in your foreclosed home, you’re basically staying in it, even though it’s technically not yours anymore. This is easier to do than it may sound. When a bank forecloses, they have to file a complaint with the circuit court of your county. The complaint will ask he judge to accept a copy of the mortgage not for filing. When you answer the complaint (as you should), demand that the original mortgage note be produced to prove the actual mortgage holder. Remember, mortgages often change owners many times, with or without your knowledge.

When you demand the original mortgage note be produced, the bank has to look for it in a warehouse along with thousands of other original notes. If they haven’t indexed it’s location (and many banks do not index, then searching for the original note is going to be challenging, to say the least!  They’ll almost certainly find it eventually, but it could take a  while. In the meantime, you can legally stay in your home, which will give you the extra time you need to make alternate living arrangements. While you stay in your home, you won’t be making any mortgage payments, which will allow you to save up the money necessary to get a new place to live when you eventually do have to move, which puts you in a much better financial position than you might have been in otherwise.